Anti-Capitalist Sentiment (with some morality)

[wufwugy]

How can you be lauding free market capitalism when talking about oil, one of the most heavily regulated commodities there are? OPEC has so much influence on international oil prices and frequently exploits this for their advantage. Oil is not a free market at all.

Saying OPEC controls the market is a little misleading. It controls it so much as it's beholden to consumers and governments. Oil isn't a completely free market, and may just be a marginally free one, globally, but the industry is expanding at costs as much as possible, and it isn't able to gouge that much

Let's say OPEC does control the market and they're charging whatever they want. What would the US government do? In a way, the US government tells whoever they want whatever the hell they want, and this government is beholden to US interests first and foremost. If, for example, the US could slap OPEC up the side of the head and get $1 gallon gas, it would. This would be one of the biggest political wins of all time. If the US could do it, it would, but it doesn't because market is running about as close to capacity as is currently feasible

If OPEC is an oligopoly, why aren't prices higher? Why have prices dropped with the reduction in Euro demand due to NGDP growth reductions in the region? If OPEC was an oligopoly, wouldn't it just say "whatever" to supply and demand and raise prices to pretty much whatever it could get away with?

Keep in mind that OPEC isn't an isolated entity. It's made up of varying interests in varying countries. It can't do whatever it wants

[d0zer]

If OPEC is an oligopoly

Funny you mention that word.

Oligopolistic competition can give rise to a wide range of different outcomes. In some situations, the firms may employ restrictive trade practices (collusion, market sharing etc.) to raise prices and restrict production in much the same way as a monopoly. Where there is a formal agreement for such collusion, this is known as a cartel. A primary example of such a cartel is OPEC which has a profound influence on the international price of oil.

Cartels usually occur in anoligopolistic industry, where the number of sellers is small (usually because barriers to entry, most notably startup costs, are high) and the products being traded are usually homogeneous.

I also never said that they completely control the market, only that they have significant influence. Regardless, oil is a barely free market.

[wufwugy]

Funny you mention that word.





I also never said that they completely control the market, only that they have significant influence. Regardless, oil is a barely free market.

Like I've said before, the more scarce a resource, the less it adheres to a free market. This fact isn't particularly relevant, though. Free markets aren't the only markets, and the oil industry has done a pretty great job of expanding its supply and not gouging prices

OPEC doesn't have a military. There isn't some grand conspiracy where sovereign states let OPEC get away with murder. OPEC is more of a symptom of the resource scarcity than a result of capitalism. An overarching body needs to control oil in order to optimize utility, but that doesn't mean that all sailing is smooth